Tuesday, January 28, 2020

Angelle: Shallow-water drilling on a ‘shot clock’

Despite an estimated $20 billion in oil and natural gas waiting to be drilled, shallow-water areas of the Gulf of Mexico remain in steep decline, putting the nation on a “shot clock” to extract it, Bureau of Safety and Environmental Enforcement Director Scott Angelle tells Offshore magazine in a new interview.

The Bureau of Ocean Energy Management estimates $20 billion in oil and natural gas resources remain in shallow-water areas, based on Oct. 1, 2019 commodity prices. At the same time, Angelle notes in the interview, oil production was at its highest point in the history of offshore development.

“But it’s clear, when you look at the numbers, that we have two distinct areas in the Gulf of Mexico: shallow water (less than 200 m) and deepwater (greater than 200 m); and the shallow-water area is in steep decline,” Angelle tells the magazine. “It’s an older province. We’ve seen the significant decline in production activity there over the last 20 years.”

Nearly 50,000 shallow-water wells have been drilled since 1947, he says. However, in the last two decades, natural gas production has declined 92% reduction in natural gas; oil, by 77%. Overall, there’s been a 73% reduction in the number of oil-producing wells.

“It gets complicated, because at the same time, we’ve gone through a period of about 20 years where there hasn’t been much capital deployed, nor many wells drilled, in the shallow-water arena,” Angelle tells Offshore. “Many of the platforms are going from economic to uneconomic. If you can’t drill a new well, over time the production just doesn’t pay for itself. As a result, we’re seeing a significant removal of this infrastructure, and we all would conclude, from a business standpoint, that as this very expensive infrastructure gets removed, it’s highly unlikely that an investor will go back to that area and install new infrastructure. The best time to get those remaining resources is before the infrastructure is finally removed. So, in a sense, I would say that the nation is on a shot clock.”